According to a report by the Wall Street Journal, Apple is planning to expand its phone offerings to "accelerate sales of its smartphones amid growing competition."

The report cited a person who claimed to have seen a prototype device late last fall, describing it as "about half the size of iPhone 4." The new model, harmonizing with a recent report by Bloomberg, is said to be aimed at delivering a low cost phone that costs "about half the price" of today's iPhone 4.

Carriers currently buy iPhone 4 at around $625 and then most offer it to their subscribers starting at $199, with the balance of the cost subsidized against a two year contract. Carriers in some countries sell the device closer to its actual price or unlocked at full price.

The new smaller iPhone is expected to priced cheap enough to be offered by carriers for free with a smaller subsidy, or in the ballpark of $300 unlocked. Rather than being a dumbed down "feature phone," the smaller iPhone is said to simply be "significantly lighter," with a smaller edge-to-edge touch screen.

The new model is also said to offer "voice navigation," without elaborating. This could reference the incorporation of the Siri voice-navigated personal assistance service Apple acquired last year, a likely inclusion in this year's iOS 5.0 release.

Apart from using a smaller screen, it's not clear how Apple could shave off much size and weight off the phone itself without using a smaller battery, which takes up most of the space within the current design of iPhone 4.

This all happened before

Apple pursued a similar strategy after establishing iPod as the dominant high end music player. In 2004, the company released a 4GB Microdrive-based iPod mini aimed at cheaper flash RAM MP3 players; it offered half the capacity of the smallest iPod and was lighter, thinner, cheaper and offered in a series of colors.

Along with the flash-based iPod nano that replaced it two years later, the iPod mini helped Apple to aggressively take over the majority of the MP3 market outside of the more profitable, high end hard drive segment.

Delivering a smaller, cheaper iPhone model would similarly enable Apple to directly take on the larger but less profitable market for lower end phones now being dominated by licensees of Google's Android in the US and China, and Nokia's Symbian and S40 platforms around the world.

Google targeted the low end of the market in an effort to create a large installed base to support its advertising business model. Its licensees have been unable to match the overall profitability of the iPhone, with all of their high end models combined selling in far smaller volume than Apple's iPhone.

Nokia already owns the vast majority of the mobile market, and its share of smartphones is largely made up of simple button phones. It too has both been unable to raise its earnings per phone or to deliver high end phones with the appeal and popularity of iPhone.

The company reports that Microsoft, which it said will be paying it "billions" to help launch new Windows Phone 7 models, is "less-focused" on the "substantial portions" representing the rest of its business, which includes "lower-end handsets aimed at emerging markets, such as India."

iPhone 5

The same source who described Apple's plans for a smaller iPhone said the company's flagship iPhone 4 would also be updated in parallel, without offering specifics. It is expected that iPhone 5 will ship in CDMA and GSM versions, despite being built around a world-mode Qualcomm chip similar or identical to the new CDMA iPhone 4 now being sold by Verizon.

That chip also supports HSPA+ with download speeds of up to 14.4Mpbs, twice as fast as the existing GSM/UMTS iPhone 4. AT&T and other GSM carriers worldwide are already running or in the process of upgrading their existing UMTS networks to support HSPA+, a technology AT&T now refers to as 4G, making it all but certain that AT&T will market iPhone 5 as being a 4G phone.

It has previously been reported that iPhone 5 would also use a new version of Apple's A4 chip, upgraded to incorporate the new generation of dual core Cortex-A9 ARM CPUs and Imagination's dual core SGX543 graphics processor, all running at a slightly faster 1.2GHz.

That same chip is likely to be used across all of Apple's new iOS devices, including iPad 2 later this quarter, and a new iPod touch and possibly Apple TV later this fall. It is likely Apple would also use the new chip in its smaller iPhone, to take advantage of economies of scale to drive the production price down. iPad 2 is also reportedly using faster RAM, something that may also make it into the design of iPhone 5.

MobileMe revamp

The report also noted new efforts by Apple to improve its MobileMe offerings for iPhone users, saying that "Apple is considering making MobileMe a free service that would serve as a 'locker' for personal memorabilia such as photos, music and videos, eliminating the need for devices to carry a lot of memory."

This correlates with an earlier report that indicated Apple would be incorporating a new Photo Stream feature in iOS 4.3, designed to automatically push photos and potentially movies to Apple's cloud servers.

The new service is also expected to incorporate the iTunes cloud services Apple has been working on for years, designed to enable users to access their purchased media over the network as a streaming service.

Both such efforts would minimize the storage required on the phone, enabling Apple to differentiate high end, 16 to 32GB iPhone models from a low cost, smaller iPhone sibling. Reports of a smaller iPhone have been circulating since at least 2008, when a model offering a 2.8 inch screen and weighing about 20 percent less was reported to be in the pipeline.

Instead of offering a smaller version of the iPhone, Apple designed a cheaper version for its second edition 3G model, using a plastic back instead of an aluminum case.

If Apple will sell a smaller iPhone and if it will be as low-cost as the article suggests, then it will have to have the 480x320 resolution of the iPhone 3GS, not the 960x640 resolution of the iPhone 4.

I hope MobileMe will still have a paid service, too. I dont want ads, lack of support or all the other horrible things that come with a service being free.

Quote:

Originally Posted by AaronJ

I'm sorry, but I don't believe this for a second (re: the smaller phone).

I can see a market for a different size iPhone like they did with the iPods, but with the integrated systems revolving around the display size going smaller or larger gets difficult. I certainly dont see a need for a smaller iPhone at this point. The US market aside, are they saturated in other countries at this point?

If this is real -- awesome. I'd adore a smaller version. I know the iPhone is already one of the slimmest smarts out there, but I still find it bulky in my pocket (in terms of length and width). Even a 20% reduction would be really welcome. I don't think a size cut would hurt the touch screen experience at all. Bring it on! Perhaps a version without a required data plan, too?

I suspect the tested a smaller iPhone and rejected it in exchange for continuing to make an 8gb model. If they do go with some kind of streaming etc, the need for storage will lessen for many making that size more viable. And if they are huge app users they might not care if the phone is one version back. Plus with component prices falling, that lower model could drop to as little as $299 full price. Now if the carriers would cut the device fee out of the plans for bringing in your own phone, we'd have a real winner. Too bad they won't until the lawmakers force them

I can see a market for a different size iPhone like they did with the iPods, but with the integrated systems revolving around the display size going smaller or larger gets difficult. I certainly dont see a need for a smaller iPhone at this point. The US market aside, are they saturated in other countries at this point?

Jobs has commented in relation to other products that Apple will strive to eliminate price umbrellas. I think a less-expensive iPhone is just an extension of this plan with iDevices in general.

If Apple will sell a smaller iPhone and if it will be as low-cost as the article suggests, then it will have to have the 480x320 resolution of the iPhone 3GS, not the 960x640 resolution of the iPhone 4.

Agreed. In any case, Nokia Is Doomed(TM)

I've accomplished my childhood's dream: My job consists mainly of playing with toys all day long.

I could see this with maybe a non-retina display at the same size but with almost nothing around the screen. Home button would be replaced with a gesture and the voice control would be much more advanced and also available in the iPhone 5.

Give me a small sized "feature phone" (iPod music/movies, etc, plus camera, contacts, calendar) with the hot spot for data sharing. Then let me choose the size screen I want by tethering either an iPod touch, iPad, or laptop. Then I can take just the phone with me when that's all I want, or the appropriate additional device for whatever tasks I want to work on.

I know there will be people whining "but then you have to carry two devices". But one of those devices would be much smaller than the current iPhone, and to me the advantage of having the option of only taking one very small device (if that's all you need) plus the flexibility to choose the screen size of your internet device, all with one data contract, far outweighs the concern of two devices.

"Carriers currently buy iPhone 4 at around $625 and then most offer it to their subscribers starting at $199, with the balance of the cost subsidized against a two year contract. Carriers in some countries sell the device closer to its actual price or unlocked at full price"

Daniel,

This is such crap and you have written it over again. Most offer it for $199USD? bullshit, 2 carriers do. In some countries it costs even more? Well of course but in some countries any iPhone you want is $0 on a 2yr contract.

For a person who espouses such a liberal and apparently deeply researched, sage like perspective. It is sadly highlighted by such crap that you are also the "media american", unaware there is a world outside your sanfransician cell tower.

In penance for your narrow article I recommend a week researching ALL the carrier and Apple pricing models for iPhone, globally and writing an article with one of your great tables so as to inform yourself and share that personal growth with everyone.

How many countries is iPhone in 88, 100+? how many carriers in each 2 or 3? How the F&$! is the pricing of 2 carriers out of 200-300 MOST? The article should read, very few carriers charge anything for an iPhone anyway so it hard to see why they would care for such a model.

Apart from using a smaller screen, it's not clear how Apple could shave off much size and weight off the phone itself without using a smaller battery, which takes up most of the space within the current design of iPhone 4.

They would use a smaller battery! They just need to ensure it uses less power. The smaller screen should use less, processor speed would be down a notch or two on the mainstream model. The graphics component of chip need not be half as powerful, as it would in all likelihood be moving 1/4 of the pixels around since the most likely resolution is the same as the 3GS rather than the retina resolution.

I don't expect it to be that much smaller than the iPhone 4 anyway - just enough to make a difference. Using an on-screen keyboard would become very difficult if it was scaled down much more than the current size.

imho it would be a great move by Apple, and a much needed one. Android clones will be attacking the market from the bottom up.

The reasons do not make sense. Size is not the only difference distinguishing different iPods. In order to cut cost Apple need to offer less functionality for iPod nano and iPod mini. So the question really is what functionality will Apple cut from a smaller cheaper iPhone? But a smaller phone with less functionality is essentially a feature phone.

"Carriers currently buy iPhone 4 at around $625 and then most offer it to their subscribers starting at $199, with the balance of the cost subsidized against a two year contract. Carriers in some countries sell the device closer to its actual price or unlocked at full price"

This is such crap and you have written it over again. Most offer it for $199USD? bullshit, 2 carriers do. In some countries it costs even more? Well of course but in some countries any iPhone you want is $0 on a 2yr contract.

Thanks for calling this out, this is really a pet peeve of mine. In almost all countries, what you pay for an iPhone depends on which plan you sign up for and how good a customer you have been in the past. Period. That mostly varies between 0 and $500.

That Market share/profit graph is just astonishing. Making me think all those whining from other company (Netgear included) is just pure jealousy and out of depth misjudgement on their part. Seeing that high of a profit margin for lower than a third share is an achievement that only a good and well-designed product with matured supporting eco-system can generate.

Quote:

Originally Posted by djsherly

Will it come with a file to whittle down my fingers in order to use it?

As the article have mentioned, if there will be indeed a smaller phone, you wouldn't need to use your finger to operate the phone at all time. Voice regonition by Siri would be use instead. Plus, have you tried using the iPod nano? Touch screen, small form and yet operable. Granted, there won't be much use to most apps out there but remember this is a phone first and foremost. It's lower cost so don't need all the features of it's big brother. This is Apple trying to capture Nokia's low cost button phone in the emerging/3rd world market and for older people who don't really have much a need for the latest games only to perhaps receive photos and setting up reminders.

Quote:

Originally Posted by frugality

Technology comes full circle?

Ha ha ha. Funny dude!

Quote:

Originally Posted by Archos

That's why Apple doesn't sell an iPod nano that older people can't see or manipulate, or potentially even hear well.

Quote:

Originally Posted by franktinsley

I could see this with maybe a non-retina display at the same size but with almost nothing around the screen. Home button would be replaced with a gesture and the voice control would be much more advanced and also available in the iPhone 5.

There's a lot of market for a lot of things. Apple wants to get in the cheap affordable phone market why not and it makes sense. Apple probably will get in the 4"+ market also. Concerns over fragmentation, I'm sure they'll figure out and find a way to make sure all apps will work fine across all versions. I think it's the right time for them give more choices to consumers like they do for the iPod. Different people have different needs, want, and taste.

I do think MobileMe will be free but I think they'll also offer premium service for it with more storage.

So:
"Carriers currently buy iPhone 4 at around $625 and then most offer it to their subscribers starting at $199, with the balance of the cost subsidized against a two year contract. Carriers in some countries sell the device closer to its actual price or unlocked at full price"

Makes some sense to me…I really hope Apple makes a smaller and cheaper iPhone, that way I might finally get rid of my Android HTC!

Hey Apple. Don't focus on another smaller phone. Finally make one that has a removable battery for once. That is truely my biggest problem with iPhone design. I have the special tools to remove one but shouldn't have to. Probably voids the warranty doing it yourself anyway.

...is MobileMe. Who cares if they make a bigger or smaller phone. If they do some people will buy some people won't.

MobileMe, however is Apple's product that has been in hiding. I use and love MM. My files are everywhere, along with my contacts, email, calendars, etc. I pay for it and I am glad to. It is always up and ad free.

I have felt for a long time that MM would become iOS for Mac. You would be able to install apps, etc. I was proven wrong with Lion. I now think MM will be your storage for the Mac and iOS. This means that iOS will link into MM to view files, sync contact, sync audio, etc. When it comes to the Mac, MM will not only link but have a saved repository of MM. This will allow you to work offline as well as have a two way backup system.

MobileMe as it is today will be free (sans iDisk). MobileMe with iTunes, iPhoto/Aperture, some sort of Backup system, and iDisk will cost you.

So:
"Carriers currently buy iPhone 4 at around $625 and then most offer it to their subscribers starting at $199, with the balance of the cost subsidized against a two year contract. Carriers in some countries sell the device closer to its actual price or unlocked at full price"

Makes some sense to meI really hope Apple makes a smaller and cheaper iPhone, that way I might finally get rid of my Android HTC!

Ever consider that maybe the carriers in Portugal are trying to make a profit?

Those of you screaming that such a move makes no sense aren't seeing the bigger picture here...

A smaller phone, as one earlier poster said, a 'feature phone' that works primarily as a phone and an ipod and can serve as a wireless tethering device for an ipad makes perfect sense.

Lots of people have both an iphone and an ipad; why duplicate the functionality of the ipad in the iphone when you don't need it if you already have an ipad?

For those of you who don't want to carry two devices, you don't have to; just buy the larger full featured iphone.

But for those people who already carry an ipad with them most of the time, again, why have that feature duplication, the extra weight, bulk, cost, etc. of a full size/featured iphone when you're already carrying an ipad with you most of the time?

It also opens up the lower cost market to Apple, giving them an opening to lead people to buy the full size device or an ipad.

That Market share/profit graph is just astonishing. Making me think all those whining from other company (Netgear included) is just pure jealousy and out of depth misjudgement on their part. Seeing that high of a profit margin for lower than a third share is an achievement that only a good and well-designed product with matured supporting eco-system can generate.

I wonder how much of that profit margin is because of the reduced number of models. There are so many variants of phones by any given company that the development costs must be horrendous, and you wouldn't be able to get the per-unit volumes high enough on custom parts to get a good component price. Parts might have a marginal cost of pennies a piece, but you still have to pay down tens to hundreds of thousands of dollars per mold or die for each part, multiply that out to a hundred custom parts per phone, for dozens of phone models, and a given phone might only be available for sale half a year to a year.

Quote:

Originally Posted by frugality

Technology comes full circle?

I think that is the lead designer of the first cell phone. I've seen a video interview, seems like an interesting person.

Quote:

Originally Posted by Andykemp

Hey Apple. Don't focus on another smaller phone. Finally make one that has a removable battery for once. That is truely my biggest problem with iPhone design. I have the special tools to remove one but shouldn't have to. Probably voids the warranty doing it yourself anyway.

By the time the battery goes bad, you probably won't have a warranty anyway.

Quote:

Originally Posted by REC

You guys all seem to be missing the point. That Siri natural language searching stuff is really, really cool.

It looks interesting. Oddly enough, that technology might make composing text messages not annoying, though part of the reason I text message at all is the main recipient has horrible reception.

And if it's acceptable to shrink down the iPhone UI and it's still usable, there should be no more arguments about making a smaller sized iPad, either.

The point is that a 7" tablet does not meet the experience of a tablet. An iPhone "nano" would not be an iPhone. The screen size would be too small. It would give the user a different more limited experience.

I am skeptical. The article says that the source says it's a prototype. I am sure it's one of many that were looked at and discarded. It will erode Apple's aggregate margins relative to quantity sold. It is not obvious to me that an extra $100 or so (amortized over 24 months, i.e.,~4/month) matters all that much to most subscribers.

The MobileMe part of the story, on the other hand, may be true. Given how poor the service is currently, it can only get better. Frankly, it's not clear to me that it would be a great selling point even if it were given away in its current form.

I am skeptical. The article says that the source says it's a prototype. I am sure it's one of many that were looked at and discarded. It will erode Apple's aggregate margins relative to quantity sold. It is not obvious to me that an extra $100 or so (amortized over 24 months, i.e.,~4/month) matters all that much to most subscribers.

RE concerns over aggregate margins: the same concerns were raised about the iPod mini/nano/shuffle categories. Didn't seem to hurt there!
RE amortized costs: consumers seem to be inordantly sensitive to initial cost and inordantly insensitive to term costs. It is stupid, but it is the case even with smart consumers (at least here in the USA--I can't speak for other societies).
If they come up with a phone that carriers will give away with contract that they can make a decent profit on, it will be huge! (I have faith that Jobs is still closely involved so I'm assuming that it will only be released if it is "magical.")

Quote:

The MobileMe part of the story, on the other hand, may be true. Given how poor the service is currently, it can only get better. Frankly, it's not clear to me that it would be a great selling point even if it were given away in its current form.

Here the Holy Grail would be to come up with something that makes users not feel like they need enough storage on their device to hold all their pics and songs. If they can make MM access/storage seemess to the clueless, it will finally be what Apple wants. I don't know how close they are to that, but I'm sure that is where they want to be!

Will it come with a file to whittle down my fingers in order to use it?

This, and it would open the door to further fragmentation of the iOS platform when it comes to apps. Already there are some apps that require an iPhone 4 or iPad due the need of the A4's processing power. The number of apps that work with all the flavors of iPhone/iPod_Touch/iPad running iOS 3.x+ is already diminishing.

It would suck to get an underpowered, cheap A4-based phone that might only have App "support" for the latest apps for only a year or two.